S4 Capital founder Sir Martin Sorrell has taken his latest aim at WPP, suggesting “old fashioned” legacy companies will struggle to survive without change.
Speaking with Proactive London’s Andrew Scott, Sorrell said his plans for S4 are to be “faster, better [and] cheaper” than legacy companies.
https://www.youtube.com/watch?v=R4sPa8CrVvw
He said: “Faster means more agility in a world where CEOs, CMOs, CFOs and procurement officers all want agility in their organisations, particularly when they are the disrupted companies or legacy companies.
“Better means understanding an ecosystem of 14 companies in a very sophisticated way,” such as Facebook, Google and Amazon.
“Those 14 companies are the ecosystem we operate in and understanding them is the ‘better’ part of faster, better, cheaper. And cheaper [is about being] more efficient.”
Sorrell took aim at the six traditional holding companies, including his former company WPP, and their fragmented and siloed business models.
“Fragmentation we worry about, and the six traditional holding companies, one I helped build over 33 years, are two things: fragmented and siloed.
Sorrell said in order to survive in the digital age, “a unitary company where everybody works together” is key.
“We don’t describe our deals as acquisitions. We describe them deliberately as merges. So the principles of the companies we negotiate with in these merger discussions are wanting to sell-in, not sell out, that’s absolutely critical.
“[S4] is on a mission to do two things. One is to create the new era advertising and marketing services company in a digital age. And secondly, [is our] mission around trying to disintermediate the traditional models.”
Sorrell also said legacy companies will fail in the digital age because “their verticals are entrenched”.
“When trying to run a legacy company, it’s very difficult in a digital transformation world, because if you’re running your legacy business in the right way, you don’t have control of the listed company, so you’re subject to the whims of the market.
“We’re in the long term brand building business. I actually have a controlling share over S4 Capital, and I think that’s really important.
Sorrell said he thinks the controlled listed companies that get criticised (such as Facbeook and Google) have the right business model.
“It’s a good model because they can take the long term view. If you’re running a legacy company, you promise the street making money in the old fashioned way, you know, revenues, margins, profits, EPS, cash flows and all those sorts of things.
“If the legacy business shudders, which in a digital world they often do, the natural reaction of the CEO is to put more pressure on the legacy business to provide money in the old fashioned way, which makes the legacy business less willing to experiment.”
“So running a legacy company is very difficult and I want to stay clear of that.”
Sorrell said at some point if S4 may need to “pivot” and think about becoming a legacy company in the future, which he said he’ll deal with when it happens.
However, he added: “For the moment, I think for the foreseeable future, we have a very interesting field plan.”
